The Definition and Ownership of Intangibles: Inside the Box? Outside the Box? What is the Box?

The examination by the Organisation for Economic Co-operation and Development (OECD) of how to take account of “intangibles” in a transfer pricing analysis opens the door to a critical review of important but sometimes understated questions about the significance of the “arm’s length principle”, and the capacity of that principle and the Transfer Pricing Guidelines that manifest it to capture “economic value” inherent in a multinational enterprise as an economic “firm” though possibly not transferred according to typical transactions on which transfer pricing analysis generally depends. This paper examines the meaning of “intangibles” and “ownership” in the context of transfer pricing generally and the OECD’s Discussion Draft entitled “Revision of the Special Considerations for Intangibles in Chapter VI of the OECD Transfer Pricing Guidelines and Related Provisions” (6 June to 14 September 2012). It considers, as does the Discussion Draft, whether legal or accounting notions need or should be expected to govern the significance of these terms in a transfer pricing analysis. The paper also raises questions about how, and how readily, the manner of conceiving “intangibles” contemplated in the Discussion Draft would be accommodated by countries’ tax and private law, and discusses how significant the answers to these further questions may be not only for the effective application of OECD guidance on “intangibles” but in relation to more general questions about how countries may successfully and sustainably assert jurisdiction to tax income of an MNE which somehow may be connected to or originate in those countries.